Brevan Howard Master Fund Limited Annual Audited Consolidated Financial Statements 2011

ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 31 December 2011

Contents 01 Independent Auditors’ Report 02 Consolidated Statement of Assets and Liabilities 03 Consolidated Condensed Schedule of Investments 17 Consolidated Statement of Operations 18 Consolidated Statement of Changes in Net Assets 20 Consolidated Statement of Cash Flows 21 Notes to the Consolidated Financial Statements IBC Management and Administration

INDEPENDENT AUDITORS’ REPORT

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

1

Independent Auditors’ Report to the Shareholders We have audited the accompanying consolidated financial statements of Brevan Howard Master Fund Limited (the “Master Fund”), which comprise the consolidated statement of assets and liabilities including the consolidated condensed schedule of investments as at 31 December 2011, the consolidated statements of operations, changes in net assets and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. This report is made solely to the Master Fund’s shareholders, as a body. Our audit work has been undertaken so that we might state to the Master Fund’s shareholders those matters we are required to state them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Master Fund and the Master Fund’s shareholders, as a body, for our audit work, for this report, or for the opinions we have formed.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risk of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Master Fund as at 31 December 2011, and its consolidated financial performance and its consolidated cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

KPMG George Town Grand Cayman 14 March 2012

2

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Consolidated Statement of Assets and Liabilities 31 December 2011

2011 US$ ’000

Assets Investments at market value (cost: US$45,391,033) (Notes 3, 5) Cash (Note 2) Investments purchased under agreements to resell (cost: US$3,214,008) (Note 7) Dividends and interest receivable Due from broker (Note 2) Long – term interest-bearing subscriptions receivable (Note 13) Other assets (Note 4) Total assets

56,301,714 34 3,143,130 106,132 11,828,578 141,900 478 71,521,966

Liabilities Investments sold short at market value (proceeds: US$7,383,620) (Note 3) Investments sold under agreements to repurchase (proceeds: US$14,047,084) (Note 7) Accounts payable and accrued expenses (Notes 4, 5, 6) Dividends and interest payable Redemptions payable Subscriptions in advance Due to broker (Note 2) Performance fee payable (Note 5) Equalisation factor (Note 15) Total liabilities

17,641,765 13,766,399 3,376 12,807 1,715,436 4 12,936,697 14,625 970 46,092,079

Net assets (Notes 8, 12) 25,429,887 Net Asset Value per share US Dollar Class A US Dollar L.P. Class A Euro Class A Sterling Class A Yen Class A Australian Dollar Class A Brazilian Real Class A Canadian Dollar Class A Norwegian Krone Class A Singapore Dollar Class A Gold Class A US Dollar Class B Euro Class B Sterling Class B US Dollar Class Y Euro Class Y Sterling Class Y US Dollar Class Z Euro Class Z Sterling Class Z Yen Class Z Cost and proceeds are presented in US$’000. See accompanying notes to the Consolidated Financial Statements. Signed on behalf of the Board by: Dennis Hunter Director 14 March 2012

US$4,304.49 US$3,867.78 €4,245.77 £4,702.17 ¥13,915.94 AUD 1,339.95 BRL 1,429.14 CAD 1,233.41 NOK 1,269.40 SGD 1,181.66 XAU 111.60 US$2,426.00 €2,456.50 £2,529.75 US$139.83 €135.57 £135.65 US$122.22 €123.20 £122.79 ¥12,064.76

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

3

Consolidated Condensed Schedule of Investments 31 December 2011

Cost is presented in US$ ’000

Market Value US$ ’000

% of Net Assets

Long Portfolio Equities Brazil (cost 3,735) Energy 3,364

0.01

Canada (cost 8,399) Basic Materials

0.03

7,403

France (cost 28,004) Consumer, Non-Cyclical Diversified Energy Industrial Technology

5,986 0.02 6,634 0.03 3,015 0.01 7,712 0.03 3,771 0.01 27,118 0.10

Germany (cost 7,905) Communications Consumer, Cyclical Consumer, Non-Cyclical Utilities

2,971 0.01 851 0.00 1,513 0.01 1,397 0.01 6,732 0.03

Guernsey (cost 540) Financial

508

0.00

Israel (cost 2,189) Communications

1,952

0.01

Italy (cost 27,848) Consumer, Cyclical Financial Utilities

11,701 0.05 156 0.00 8,777 0.03 20,634 0.08

Norway (cost 20,686) Basic Materials Energy Financial

1,561 0.01 11,406 0.04 5,166 0.02 18,133 0.07

Sweden (cost 7,219) Communications Financial Industrial

1,508 0.01 2,782 0.01 2,991 0.01 7,281 0.03

4

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Consolidated Condensed Schedule of Investments continued 31 December 2011

Cost is presented in US$ ’000

Market Value US$ ’000

% of Net Assets

Long Portfolio (continued) Equities (continued) Switzerland (cost 12,222) Consumer, Cyclical 9,233 0.04 Financial 2,916 0.01 12,149 0.05 United Kingdom (cost 6,860) Financial

4,450

0.02

United States (cost 254,038) Basic Materials Communications Consumer, Cyclical Consumer, Non-Cyclical Energy Financial Industrial Technology

46,076 0.18 35,508 0.14 10,516 0.04 30,641 0.12 39,235 0.15 21,106 0.09 22,847 0.09 50,860 0.20 256,789 1.01

Total Equities (cost 379,645)

366,513

1.44

Fixed Income Securities Argentina (cost 15,944) Government

15,389

0.06

Australia (cost 4,705) Industrial

3,671

0.01

Bermuda (cost 4,295) Industrial

4,622

0.02

Canada (cost 2,495) Basic Materials

8,468

0.03

Cayman Islands (cost 40,807) Asset Backed Securities Financial Mortgage Backed Securities Denmark (cost 2,542) Mortgage Backed Securities France (cost 909,581) Basic Materials Financial Government

11,500 0.05 6,488 0.03 1,100 0.00 19,088 0.08 2,462

0.01

12,776 0.05 2,216 0.01 862,922 3.39 877,914 3.45

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Cost is presented in US$ ’000

Market Value US$ ’000

5

% of Net Assets

Long Portfolio (continued) Fixed Income Securities (continued) Germany (cost 77,681) Financial 772 0.00 Government 78,181 0.31 78,953 0.31 Greece (cost 169,277) Government

65,937

Ireland (cost 69,725) Asset Backed Securities Financial Mortgage Backed Securities

2,527 0.01 2,863 0.02 44,344 0.17 49,734 0.20

Japan (cost 3,920,104) Government 30,000,000 JGB 0.4% 09/20/2016 21,000,000 JTDB 0.0% 01/20/2012 50,000,000 JTDB 0.0% 04/20/2012 70,000,000 JTDB 0.0% 05/21/2012 20,000,000 JTDB 0.0% 06/11/2012 20,000,000 JTDB 0.0% 06/20/2012 40,000,000 JTDB 0.0% 07/20/2012 50,000,000 JTDB 0.0% 11/20/2012 Utilities

387,154 1.52 270,190 1.06 643,143 2.53 900,320 3.54 257,217 1.01 257,213 1.01 514,375 2.02 642,751 2.53 4,277 0.02 3,876,640 15.24

0.26

Jersey (cost 6,290) Asset Backed Securities

6,689

Kazakhstan (cost 7,129) Energy Financial

3,430 0.01 1,791 0.01 5,221 0.02

Luxembourg (cost 22,491) Asset Backed Securities Financial Industrial Mortgage Backed Securities

2,698 0.01 4,060 0.02 1,734 0.01 6,038 0.02 14,530 0.06

0.03

Mexico (cost 503) Financial

371

0.00

Netherlands (cost 13,594) Mortgage Backed Securities

10,735

0.04

6

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Consolidated Condensed Schedule of Investments continued 31 December 2011

Cost is presented in US$ ’000

Market Value US$ ’000

% of Net Assets

Long Portfolio (continued) Fixed Income Securities (continued) Norway (cost 6,746) Energy 4,054

0.02

Portugal (cost 16,658) Financial

16,128

0.06

South Africa (cost 62,914) Government

62,988

0.25

Spain (cost 33,029) Government

31,314

0.12

10,372

0.04

United Kingdom (cost 3,360,079) Asset Backed Securities Government 600,000 UKT 3.7% 09/07/2019 282,600 UKT 3.7% 09/07/2020 7,170 UKT 3.7% 07/09/2021 121,000 UKT 3.7% 09/07/2021 117,400 UKT 3.7% 07/22/2052 683,300 UKT 4.5% 03/07/2019 57,400 UKT 4.7% 03/07/2020 25,000 UKTI 0.1% 03/22/2029 38,950 UKTI 1.9% 11/22/2022 Mortgage Backed Securities United States (cost 27,488,332) Asset Backed Securities Basic Materials Communications Consumer, Cyclical Consumer, Non-Cyclical Energy Financial Government 500,000 B 0.0% 01/12/2012 300,000 B 0.0% 02/09/2012 1,000,000 B 0.0% 03/01/2012 2,000,000 B 0.0% 03/08/2012 1,175,000 B 0.0% 05/04/2012 2,500,000 B 0.0% 05/03/2012 200,000 B 0.0% 05/10/2012 2,800,000 B 0.0% 05/31/2012 2,250,000 B 0.0% 06/28/2012 750,000 B 0.0% 09/20/2012 2,025,000 B 0.0% 10/18/2012 1,000,000 B 0.0% 11/15/2012 1,600,000 B 0.0% 12/13/2012

1,064,177 4.18 503,269 1.98 12,762 0.05 215,367 0.85 209,172 0.82 1,267,462 4.99 109,047 0.43 40,963 0.16 88,658 0.35 83,877 0.33 3,605,126 14.18

369,536 8,263 1,726 34,523 11,121 13,228 310,291

1.45 0.03 0.01 0.13 0.04 0.05 1.22

499,998 299,997 999,992 1,999,981 1,174,968 2,499,913 199,984 2,799,643 2,249,491 749,648 2,023,887 999,264 1,598,410

1.97 1.18 3.93 7.86 4.62 9.83 0.79 11.01 8.85 2.95 7.96 3.93 6.29

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Cost is presented in US$ ’000

Market Value US$ ’000

7

% of Net Assets

Long Portfolio (continued) Fixed Income Securities (continued) United States (cost 27,488,332) (continued) 12,312 T 1.0% 10/31/2016 12,393 0.05 504,532 T 1.4% 11/30/2015 518,682 2.04 29,419 T 1.7% 05/31/2016 30,685 0.12 2,204,447 T 2.0% 11/15/2021 2,219,086 8.73 45,107 T 2.1% 05/31/2015 47,553 0.19 43,031 T 2.1% 12/31/2015 45,539 0.18 23,634 T 2.4% 05/31/2018 25,251 0.10 15,379 T 2.4% 07/31/2017 16,482 0.06 362 T 2.6% 08/15/2020 389 0.00 780 T 2.7% 05/31/2017 851 0.00 427,268 T 2.7% 12/31/2017 466,807 1.84 1,341,570 T 3.1% 05/15/2021 1,491,763 5.87 492,800 T 3.1% 01/31/2017 546,257 2.15 500,000 T 3.1% 11/15/2041 518,984 2.04 128,044 T 3.5% 05/15/2020 146,790 0.58 515,783 T 3.7% 08/15/2041 601,451 2.37 4,409 T 3.9% 08/15/2040 5,240 0.02 45,097 T 4.2% 11/15/2040 57,034 0.22 39,521 T 4.6% 02/15/2040 52,883 0.21 14,851 T 4.7% 02/15/2041 20,302 0.08 122,250 T 7.5% 11/15/2016 160,878 0.63 67,261 TII 0.6% 04/15/2013 73,307 0.29 122,709 TII 2.0% 04/15/2012 137,532 0.54 116,405 TII 3.0% 07/15/2012 149,726 0.59 Industrial 15,900 0.06 Mortgage Backed Securities 1,530,532 6.01 27,736,161 109.07 Venezuela (cost 6,589) Government

6,485

0.03

Virgin Islands, British (cost 4,597) Diversified

3,600

0.01

Total Fixed Income Securities (cost 36,246,107)

36,506,280

143.56

Private Placements Cyprus (cost 42,364) Property

35,459

0.14

Germany (cost 13,897) Funds

13,554

0.05

8

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Consolidated Condensed Schedule of Investments continued 31 December 2011

Cost is presented in US$ ’000

Market Value US$ ’000

% of Net Assets

Long Portfolio (continued) Private Placements (continued) Israel (cost 2,500) Technology –

0.00

Italy (cost 4,415) Financial

–

0.00

United Kingdom (cost 267) Funds

257

0.00

United States (cost 8,922) Communications Funds Total Private Placements (cost 72,365)

2,735 0.01 2,690 0.02 5,425 0.03 54,695

0.22

Interest Rate Guarantee Options (cost 967,809) EUR termination dates through December 2049 GBP termination dates through January 2040 KRW termination dates through August 2012 SEK termination dates through June 2012 USD termination dates through October 2036

482,299 1.90 248,264 0.98 5 0.00 1,172 0.00 615,468 2.42 1,347,208 5.30

Forward Rate Agreements EUR termination dates through March 2013 ILS termination dates through June 2012 NOK termination dates through December 2012 PLN termination dates through April 2012 SEK termination dates through December 2013 USD termination dates through March 2013

12,904 0.05 391 0.00 191 0.00 443 0.00 25,403 0.10 4,427 0.02 43,759 0.17

Cross Currency Swaps DKK termination dates through March 2017 EUR termination dates through September 2012 GBP termination dates through January 2014 SEK termination dates through October 2014 TRY termination dates through May 2017 USD termination dates through December 2018

7,308 0.03 51,376 0.20 70,436 0.28 49,347 0.19 44,659 0.18 77,273 0.30 300,399 1.18

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Cost is presented in US$ ’000

Market Value US$ ’000

9

% of Net Assets

Long Portfolio (continued) Interest Rate Swaps AUD termination dates through December 2013 4,777 0.02 BRL termination dates through January 2014 27,596 0.11 CAD termination dates through April 2031 8,433 0.03 CHF termination dates through March 2041 53,832 0.21 CLP termination dates through December 2013 327 0.00 CZK termination dates through December 2021 36 0.00 EUR termination dates through December 2051 1,343,362 5.28 GBP termination dates through December 2069 606,366 2.38 HKD termination dates through August 2018 2,086 0.01 ILS termination dates through December 2021 20,278 0.08 JPY termination dates through June 2031 25,578 0.10 KRW termination dates through January 2016 1,957 0.01 MXN termination dates through October 2012 263 0.00 MYR termination dates through September 2013 1,997 0.01 NOK termination dates through September 2013 57 0.00 PLN termination dates through January 2012 1,698 0.01 RUB termination dates through January 2012 3,567 0.01 SAR termination dates through June 2013 64 0.00 SEK termination dates through December 2031 1,062 0.01 TWD termination dates through November 2012 253 0.00 USD termination dates through June 2049 1,990,737 7.83 4,094,326 16.10 Credit Default Swaps (cost 865,266) EUR termination dates through December 2021 JPY termination dates through December 2015 USD termination dates through October 2052

218,178 0.86 957 0.00 877,227 3.45 1,096,362 4.31

Swaptions (cost 2,507,497) AUD termination dates through February 2012 CAD termination dates through August 2013 EUR termination dates through September 2032 GBP termination dates through October 2037 HKD termination dates through November 2012 JPY termination dates through March 2014 SEK termination dates through May 2013 USD termination dates through October 2052

28,108 0.11 319 0.00 1,447,884 5.69 1,906,115 7.50 4,687 0.02 41,157 0.16 198,247 0.78 3,507,394 13.79 7,133,911 28.05

10

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Consolidated Condensed Schedule of Investments continued 31 December 2011

Cost is presented in US$ ’000

Market Value US$ ’000

% of Net Assets

Long Portfolio (continued) FX Contracts AUD/JPY termination dates through June 2014 19,233 0.08 AUD/USD termination dates through June 2012 45,185 0.18 BRL/USD termination dates through March 2012 29,231 0.11 CAD/USD termination dates through September 2012 13,575 0.05 CHF/USD termination dates through July 2018 164,073 0.65 CNH/USD termination dates through January 2012 12,699 0.05 CNY/USD termination dates through October 2012 29,831 0.12 EUR/BRL termination dates through June 2012 105,657 0.42 EUR/CHF termination dates through August 2017 76,275 0.30 EUR/GBP termination dates through May 2012 11,899 0.05 EUR/JPY termination dates through October 2012 29,155 0.11 EUR/USD termination dates through June 2027 261,437 1.02 GBP/USD termination dates through August 2012 38,010 0.15 INR/USD termination dates through June 2012 47,938 0.19 JPY/USD termination dates through January 2016 69,652 0.27 KRW/USD termination dates through September 2012 19,180 0.08 RUB/USD termination dates through December 2012 33,723 0.13 SGD/USD termination dates through September 2012 23,537 0.09 TRY/USD termination dates through December 2012 13,523 0.05 Other termination dates through October 2012 60,963 0.24 1,104,776 4.34 Exchange Traded Futures Euribor 3 month termination dates through March 2015 Eurodollar termination dates through June 2017 Euro termination dates through March 2012 US Treasury Note termination dates through March 2012 WTI Crude Oil termination dates through November 2017 Other termination dates through November 2012

32,726 0.13 164,304 0.65 127,128 0.50 36,002 0.14 33,480 0.13 23,575 0.09 417,215 1.64

Exchange Traded Options (cost 252,294) Euribor 3 month termination dates through September 2013 Eurodollar termination dates through December 2012 Euro termination dates through January 2012 Sterling 3 month termination dates through March 2013 US Treasury Note termination dates through February 2012 Other termination dates through February 2012

223,826 0.88 131,179 0.52 19,320 0.08 26,274 0.10 53,223 0.21 2,700 0.01 456,522 1.80

Commodity Options (cost 1,416,114) ICE BRENT termination dates through December 2012 Natural Gas termination dates through November 2017 WTI Crude Oil termination dates through November 2017 Other termination dates through December 2014

140,911 0.55 165,515 0.65 489,731 1.93 28,222 0.11 824,379 3.24

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Cost is presented in US$ ’000

Market Value US$ ’000

11

% of Net Assets

Long Portfolio (continued) Equity Options (cost 320,056) DAX Index termination dates through February 2012 37,144 0.15 NIKKEI 225 Index termination dates through December 2013 25,278 0.10 S&P 500 termination dates through September 2015 81,054 0.32 Other termination dates through December 2014 31,446 0.12 174,922 0.69 FX Options (cost 1,351,542) AUD/USD termination dates through August 2012 EUR/AUD termination dates through May 2012 EUR/BRL termination dates through June 2012 EUR/CHF termination dates through August 2012 EUR/GBP termination dates through June 2012 EUR/HUF termination dates through March 2012 EUR/NOK termination dates through December 2012 EUR/SEK termination dates through May 2012 EUR/USD termination dates through January 2018 USD/BRL termination dates through June 2012 USD/CAD termination dates through June 2012 USD/CHF termination dates through October 2027 USD/JPY termination dates through March 2020 USD/TRY termination dates through October 2012 XCU/USD termination dates through December 2013 Other termination dates through May 2014 Equity Swaps Investments in Affiliated Funds (cost 1,012,338) Brevan Howard Commodities Strategies Fund L.P. Brevan Howard Emerging Market Strategies Fund L.P. Brevan Howard Equity Strategies Master Fund Limited Brevan Howard Investment Fund – Absolute Return Bond Plus Fund Brevan Howard Investment Fund – Emerging Markets Local Fixed Income Fund Brevan Howard Investment Fund – Emerging Markets Local Fixed Income Fund Limited Brevan Howard Strategic Opportunities Fund Limited Brevan Howard Systematic Trading Master Fund Limited Total Investments at Market Value (cost 45,391,033)

28,807 0.11 15,394 0.06 27,702 0.11 25,708 0.10 11,600 0.05 26,967 0.11 15,052 0.06 21,146 0.08 409,599 1.61 15,994 0.06 12,289 0.05 119,670 0.47 176,989 0.69 27,062 0.11 73,018 0.29 131,138 0.52 1,138,135 4.48 17,580

0.06

209,986 0.82 473,661 1.86 1,743 0.01 101,145 0.40 98,188 0.39 10,141 0.04 4,790 0.02 325,078 1.28 1,224,732 4.82 56,301,714

221.40

12

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Consolidated Condensed Schedule of Investments continued 31 December 2011

Proceeds are presented in US$ ’000

Market Value US$ ’000

% of Net Assets

Short Portfolio Equities Australia (proceeds (2,017)) Basic Materials

(2,004)

(0.01)

Denmark (proceeds (6,758)) Industrial

(6,983)

(0.03)

France (proceeds (25,208)) Basic Materials Consumer, Cyclical Consumer, Non-Cyclical Industrial Utilities

(3,235) (0.01) (5,451) (0.02) (9,073) (0.04) (4,375) (0.02) (3,031) (0.01) (25,165) (0.10)

Germany (proceeds (21,054)) Basic Materials Consumer, Cyclical Technology Utilities

(1,606) (0.01) (10,743) (0.04) (6,034) (0.02) (1,335) (0.01) (19,718) (0.08)

Italy (proceeds (19,661)) Consumer, Cyclical Consumer, Non-Cyclical Energy Utilities

(10,373) (0.04) (1,439) (0.01) (2,866) (0.01) (153) (0.00) (14,831) (0.06)

Jersey (proceeds (1,237)) Consumer, Cyclical

(1,320)

(0.01)

Luxembourg (proceeds (5,504)) Basic Materials

(5,751)

(0.02)

Netherlands (proceeds (13,458)) Basic Materials Consumer, Non-Cyclical Industrial

(7,351) (0.03) (6,102) (0.02) (591) (0.00) (14,044) (0.05)

Sweden (proceeds (7,961)) Consumer, Cyclical Industrial

(3,984) (0.01) (3,996) (0.02) (7,980) (0.03)

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Proceeds are presented in US$ ’000

Short Portfolio (continued) Equities (continued) Switzerland (proceeds (11,161)) Communications Consumer, Cyclical Consumer, Non-Cyclical United Kingdom (proceeds (8,991)) Energy

Market Value US$ ’000

13

% of Net Assets

(1,494) (0.01) (5,533) (0.02) (3,778) (0.01) (10,805) (0.04)

(9,146)

(0.04)

United States (proceeds (299,436)) Basic Materials Communications Consumer, Cyclical Consumer, Non-Cyclical Financial Funds Industrial Technology

(15,153) (0.06) (20,032) (0.08) (66,940) (0.26) (1,756) (0.01) (9,958) (0.04) (145,549) (0.57) (25,804) (0.10) (18,334) (0.07) (303,526) (1.19)

Total Equities (proceeds (422,446))

(421,273)

(1.66)

Fixed Income Securities France (proceeds (229,960)) Government

(226,010)

(0.89)

Luxembourg (proceeds (34,063)) Government

(33,197)

(0.13)

Netherlands (proceeds (72,949)) Government

(73,703)

(0.29)

Spain (proceeds (60,598)) Government

(60,968)

(0.24)

Turkey (proceeds (11,200)) Government

(11,088)

(0.04)

United Kingdom (proceeds (95,124)) Government

(94,992)

(0.37)

United States (proceeds (1,137,970)) Financial Government Industrial Mortgage Backed Securities

(3,876) (0.02) (1,165,522) (4.59) (5,932) (0.02) (7,581) (0.03) (1,182,911) (4.66)

Total Fixed Income Securities (proceeds (1,641,864))

(1,682,869)

(6.62)

14

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Consolidated Condensed Schedule of Investments continued 31 December 2011

Proceeds are presented in US$ ’000

Market Value US$ ’000

% of Net Assets

Short Portfolio (continued) Interest Rate Guarantee Options (proceeds (282,480)) EUR termination dates through December 2041 GBP termination dates through June 2030 SEK termination dates through June 2012 USD termination dates through September 2028

(55,193) (0.22) (82,940) (0.33) (535) (0.00) (456,473) (1.79) (595,141) (2.34)

Forward Rate Agreements EUR termination dates through March 2014 ILS termination dates through October 2012 NOK termination dates through December 2012 SEK termination dates through December 2013 USD termination dates through June 2012

(85,975) (0.34) (485) (0.00) (98) (0.00) (26,187) (0.10) (2,352) (0.01) (115,097) (0.45)

Cross Currency Swaps EUR termination dates through March 2017 JPY termination dates through August 2013 RON termination dates through September 2012 SEK termination dates through June 2012 TRY termination dates through December 2018 USD termination dates through May 2017

(7,541) (0.03) (26,920) (0.11) (52,373) (0.21) (1,234) (0.00) (50,943) (0.20) (163,964) (0.64) (302,975) (1.19)

Interest Rate Swaps BRL termination dates through January 2014 CAD termination dates through April 2036 CHF termination dates through September 2036 CLP termination dates through December 2013 CZK termination dates through December 2021 EUR termination dates through June 2059 GBP termination dates through December 2061 HKD termination dates through October 2021 ILS termination dates through July 2021 JPY termination dates through January 2036 KRW termination dates through January 2021 MXN termination dates through March 2013 MYR termination dates through October 2021 NZD termination dates through June 2014 PLN termination dates through January 2012 SAR termination dates through May 2012 SEK termination dates through December 2031 SGD termination dates through May 2015 TWD termination dates through March 2016 USD termination dates through December 2051

(25,178) (0.10) (105,174) (0.41) (36,734) (0.14) (640) (0.00) (2,146) (0.01) (1,642,916) (6.46) (755,199) (2.97) (4,723) (0.02) (4,228) (0.02) (19,814) (0.08) (2,223) (0.01) (1,302) (0.00) (153) (0.00) (15,596) (0.06) (1,512) (0.01) (557) (0.00) (108) (0.00) (2,822) (0.01) (1,325) (0.01) (2,228,290) (8.76) (4,850,640) (19.07)

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

15

Proceeds are presented in US$ ’000

Market Value US$ ’000

% of Net Assets

Short Portfolio (continued) Credit Default Swaps (proceeds (1,058,283)) EUR termination dates through January 2050 GBP termination dates through June 2016 JPY termination dates through June 2016 USD termination dates through October 2052

(397,515) (1.56) (336) (0.00) (1,564) (0.01) (952,562) (3.75) (1,351,977) (5.32)

Swaptions (proceeds (1,201,817)) AUD termination dates through February 2012 EUR termination dates through June 2036 GBP termination dates through May 2030 JPY termination dates through March 2014 SEK termination dates through May 2013 USD termination dates through June 2036

(41,390) (0.16) (773,352) (3.04) (559,456) (2.20) (26,176) (0.10) (183,249) (0.72) (2,990,525) (11.76) (4,574,148) (17.98)

FX Contracts AUD/USD termination dates through March 2012 BRL/USD termination dates through June 2012 CHF/USD termination dates through July 2018 CNY/USD termination dates through August 2012 EUR/BRL termination dates through March 2012 EUR/CHF termination dates through August 2017 EUR/GBP termination dates through June 2012 EUR/NOK termination dates through May 2012 EUR/USD termination dates through June 2027 GBP/USD termination dates through June 2012 INR/USD termination dates through June 2012 JPY/USD termination dates through November 2013 Other termination dates through March 2012

(46,621) (0.19) (37,702) (0.15) (145,011) (0.57) (34,993) (0.14) (105,722) (0.42) (92,676) (0.36) (12,659) (0.05) (16,083) (0.06) (292,680) (1.15) (89,139) (0.35) (49,198) (0.19) (183,017) (0.72) (116,490) (0.46) (1,221,991) (4.81)

Exchange Traded Futures Euribor 3 month termination dates through December 2013 Eurodollar termination dates through September 2021 Natural Gas termination dates through November 2015 US Treasury Note termination dates through March 2012 Other termination dates through November 2018

(36,583) (0.14) (273,834) (1.08) (18,095) (0.07) (21,709) (0.09) (33,757) (0.13) (383,978) (1.51)

Exchange Traded Options (proceeds (293,112)) Euribor 3 month termination dates through September 2013 Euro termination dates through January 2012 Eurodollar termination dates through February 2014 Sterling 3 month termination dates through December 2012 US Treasury Note termination dates through February 2012 Other termination dates through February 2012

(122,382) (0.48) (23,931) (0.09) (142,239) (0.56) (23,229) (0.09) (38,659) (0.15) (6,649) (0.03) (357,089) (1.40)

16

CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Consolidated Condensed Schedule of Investments continued 31 December 2011

Proceeds are presented in US$ ’000

Market Value US$ ’000

% of Net Assets

Short Portfolio (continued) Commodity Options (proceeds (1,013,922)) ICE BRENT termination dates through December 2014 Natural Gas termination dates through November 2017 WTI Crude Oil termination dates through November 2015 Other termination dates through May 2014

(161,206) (0.64) (47,684) (0.19) (388,097) (1.52) (12,962) (0.05) (609,949) (2.40)

Equity Options (proceeds (236,719)) DAX Index termination dates through February 2012 S&P 500 termination dates through December 2013 Other termination dates through December 2014

(29,917) (0.12) (109,926) (0.43) (11,327) (0.04) (151,170) (0.59)

FX Options (proceeds (1,232,977)) EUR/CHF termination dates through October 2012 EUR/GBP termination dates through May 2012 EUR/HUF termination dates through March 2012 EUR/NOK termination dates through May 2012 EUR/SEK termination dates through May 2012 EUR/USD termination dates through November 2013 GBP/USD termination dates through August 2012 USD/CHF termination dates through November 2017 USD/JPY termination dates through December 2020 USD/KRW termination dates through September 2012 USD/SGD termination dates through June 2012 XCU/USD termination dates through December 2013 Other termination dates through March 2020

(60,146) (0.24) (12,877) (0.05) (19,904) (0.08) (11,893) (0.05) (17,457) (0.07) (249,418) (0.98) (15,322) (0.06) (33,286) (0.13) (406,119) (1.60) (23,608) (0.09) (13,970) (0.05) (72,533) (0.28) (72,543) (0.29) (1,009,076) (3.97)

Equity Swaps

(14,392)

(0.06)

Total Investments sold short at Market Value (proceeds (7,383,620))

(17,641,765)

(69.37)

See accompanying notes to the Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF FINANCIAL OPERATIONS NOTES TO THE CONSOLIDATED STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

17

Consolidated Statement of Operations 31 December 2011

2011 US$ ’000

Investment income Interest income Dividend income (net of withholding tax of US$1,840) Total income

762,305 5,720 768,025

Expenses Interest expense Professional fees and other Operational services fee (Note 4) Management fee (Note 5) Administration fee (Note 6) Commission for futures and options Dividend expense on investments sold short Performance fee (Note 5) Total expenses

405,408 6,073 124,267 27,739 28,460 114,896 8,112 17,220 732,175

Net investment income

35,850

Net realised and unrealised gain/(loss) on investments Net realised gain on investments, investments purchased under agreements to resell and investments sold under agreements to repurchase (Note 2) Net change in unrealised depreciation on investments, investments purchased under agreements to resell and investments sold under agreements to repurchase (Note 2) Net realised and unrealised gain on investments

(1,426,343) 4,010,908

Net increase in net assets resulting from operations

4,046,758

Withholding tax is presented in US$’000. See accompanying notes to the Consolidated Financial Statements.

5,437,251

18

CONSOLIDATED STATEMENT OF FINANCIAL CHANGES IN NET ASSETS NOTES TO THE CONSOLIDATED STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Consolidated Statement of Changes in Net Assets 31 December 2011

2011 US$ ’000

Net increase in net assets resulting from operations Net investment income 35,850 Net realised gain on investments, investments purchased under agreements to resell and investments sold under agreements to repurchase 5,437,251 Net change in unrealised depreciation on investments, investments purchased under agreements to resell and investments sold under agreements to repurchase (1,426,343) 4,046,758 Share Capital Transactions Issue of shares US Dollar Class A US Dollar L.P. Class A Euro Class A Sterling Class A Yen Class A Australian Dollar Class A Brazilian Real Class A Canadian Dollar Class A Norwegian Krone Class A Singapore Dollar Class A Gold Class A

2,271,535 443,784 120,201 508,550 193,368 18,255 1,991 120,122 43,376 181,269 7,307

US Dollar Class B Sterling Class B

3,377 162,325

US Dollar Class Y Euro Class Y Sterling Class Y

17,288 4,452 85,037

US Dollar Class Z Euro Class Z Sterling Class Z Yen Class Z

310,427 14,942 319,125 12,280

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

19

2011 US$ ’000

Redemption of Shares US Dollar Class A US Dollar L.P. Class A Euro Class A Sterling Class A Yen Class A Australian Dollar Class A Canadian Dollar Class A Singapore Dollar Class A Swiss Franc Class A

(4,524,389) (904,235) (626,306) (477,111) (150,754) (186,600) (79,885) (3,327) (127,766)

US Dollar Class B Euro Class B Sterling Class B

(55,891) (146,713) (58,478)

US Dollar Class Y Euro Class Y Sterling Class Y

(39,462) (4,917) (11,168)

US Dollar Class Z Euro Class Z Sterling Class Z

(220,000) (10,513) (17,263)

Equalisation write back (Note 15)

73

Net increase in net assets Net assets – beginning of year Net assets – end of year

1,241,064 24,188,823 25,429,887

See accompanying notes to the Consolidated Financial Statements.

20

CONSOLIDATED STATEMENT OF CASH FLOWS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Consolidated Statement of Cash Flows 31 December 2011

2011 US$ ’000

Cash flows from operating activities: Net increase in net assets resulting from operations

4,046,758

Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: Increase in investments at market value Decrease in investments purchased under agreement to resell Decrease in dividends and interest receivable Increase in other assets Increase in due from broker Decrease in securities sold short at market value Increase in due to broker Decrease in accounts payable and accrued expenses Decrease in dividends and interest payable Decrease in performance fee payable Net cash used in operating activities

(3,032,407) 2,077,000 62,599 (215) (9,393,986) (7,412,149) 8,066,243 (2,310) (182,133) (6,539) (5,777,139)

Cash flows from financing activities Proceeds on issue of shares Payment on redemption of shares Equalisation factor Decrease in investments purchased under agreement to resell Decrease in investments sold under agreement to repurchase

4,812,977 (6,428,392) 1,071 13,826,830 (6,460,724)

Net cash provided by financing activities Net decrease in cash Cash – beginning of year Cash – end of year

5,751,762 (25,377) 25,411 34

Non-cash financing activities not included herein consist of: Movement in long-term interest-bearing subscriptions receivable of US$5,945,239. Movement in redemptions payable of US$1,216,385,866. See accompanying notes to the Consolidated Financial Statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

21

Notes to the Consolidated Financial Statements 31 December 2011

1. Organisation Brevan Howard Master Fund Limited (the “Master Fund”) is an exempted limited liability company which was incorporated under the Companies Law of the Cayman Islands on 22 January 2003 and commenced trading on 1 April 2003. The Master Fund registered under the Mutual Funds Law of the Cayman Islands on 4 March 2003. The Master Fund seeks to generate consistent long-term appreciation through active leveraged trading and investment on a global basis. The Master Fund’s investment strategy is comprised of global investment strategies, and a number of long and short strategies that may have directional risk. Brevan Howard Capital Management L.P. (the “Manager”), acting through its sole general partner, Brevan Howard Capital Management Limited, is the Manager of the Master Fund. The Manager has appointed each of: (i) Brevan Howard Asset Management LLP (“BHAM”); (ii) Brevan Howard Investment Products Limited (“BHIPL”); (iii) Brevan Howard (Hong Kong) Limited; (iv) Brevan Howard (Israel) Limited; (v) DW Investment Management, L.P and (vi) BH-DG Systematic Trading LLP, as Investment Managers of the Master Fund’s assets, in each case subject to risk oversight and treasury management by BHIPL and/ or BHAM. The Manager may in future appoint additional Investment Managers provided that they are affiliates of the Manager or the Investment Managers. The Manager and the Investment Managers (and/or their members, Directors, employees, related entities and connected persons and their respective members, Directors and employees) may subscribe, directly or indirectly, for shares and/or interests in the Master Fund’s feeder funds. The feeder funds comprise of Brevan Howard Fund Limited, Brevan Howard L.P. and BH Macro Limited (together the “Feeder Funds”). The registered office of the Master Fund is at M&C Corporate Services Limited, P.O. Box 309, George Town, Grand Cayman, KY1-1104, Cayman Islands. 2. Significant accounting policies Basis of preparation The accompanying Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Consolidated Financial Statements are presented in US Dollars. Security transactions and valuation Security transactions are accounted for on a trade date basis. Most positions of the Master Fund and its Subsidiaries are priced at the same time each day. This provides reliable comparative

pricing of positions which are traded in different markets. A snapshot of all markets (excluding Pacific Rim and Australasia) is made at 4:00 p.m. GMT. Pacific Rim and Australasia positions are priced as at local end-of-day mid market levels. The investment valuation under the method employed by the Master Fund and its Subsidiaries as at 31 December 2011 is not materially different to the investment valuation using the last quoted price. Instruments with directly observable prices are priced to independent external data sources (e.g. exchange traded futures, options, equities, government and corporate debt securities). Illiquid credit markets have resulted in inactive markets for certain of the Master Fund and its Subsidiaries’ financial instruments. As a result, there is no or limited observable market data for these assets and liabilities. Fair value estimates for financial instruments for which no or limited observable market data is available are based on judgments regarding current economic conditions, liquidity discounts, currency, credit, and interest rate risks, loss experience and other factors. These estimates involve significant uncertainties and judgments and cannot be determined with precision. As a result, such calculated fair value estimates may not be realisable in a current sale or immediate settlement of the instrument. In addition, changes in the underlying assumptions used in the fair value measurement technique, including discount rates, liquidity risks and estimates of future cash flows, could significantly affect these fair value estimates. Estimates of the fair value Level 3 assets and liabilities as defined by the Accounting Standards Codification (“ASC”) 820 of the Master Fund and its Subsidiaries’ financial instruments are disclosed in Note 3. Investments in other funds are valued at the latest available reported NAV of the respective fund received from that fund’s administrator. In some cases these may be unaudited NAVs. Some instruments may be priced using models in which some or all parameters are not directly driven by market – observable levels (e.g. unlisted securities, multifactored options or private placements). OTC swap, forward and option values are determined based on relevant market information on the underlying reference assets which may include credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures and forward currency rates. Realised gains and losses on investments are calculated using the highest in first out method. Realised and unrealised gains and losses are recorded at the reporting date in the Consolidated Statement of Operations.

22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Notes to the Consolidated Financial Statements continued 31 December 2011

2. Significant accounting policies (continued) Income and expense recognition Interest income and expense including prime broker and ISDA/ ISMA interest is recognised in the Consolidated Statement of Operations on an accruals basis. Interest income and expense includes the amortisation of any discount or premium or other differences between the initial carrying amount of an interest-bearing instrument and its amount at maturity calculated on an effective interest rate basis. Dividend income on long positions is recognised on the ex-dividend date and dividend declared on short positions existing on the record date is recognised on the ex-dividend date as an expense in the Consolidated Statement of Operations. Investments purchased under agreements to resell and investments sold under agreements to repurchase The Master Fund and its Subsidiaries enter into investments purchased under agreements to resell and investments sold under agreements to repurchase. These agreements are accounted for as collateralised investments and are recorded at cost plus accrued interest. The Investment Managers monitor the market value of the Master Fund and its Subsidiaries’ underlying contract amounts, including accrued interest, and requests or provides additional collateral where deemed appropriate. Interest on investments purchased under agreements to resell and investments sold under agreements to repurchase is accrued on a daily basis. Asset-Backed Securities The Master Fund and its Subsidiaries may invest in asset-backed securities. These securities include mortgage backed securities, collateralised debt obligations and other asset-backed securities representing interests in pools of loans or other receivables. Mortgage backed securities are created from pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Asset‑backed securities are created from many types of assets, including auto loans, credit card receivables, home equity loans, and student loans. The rate of pre-payments on underlying assets will affect the price and volatility of an asset backed security, and may have the effect of shortening or extending the effective duration of the security relative to what was anticipated at the time of purchase. Collateralised Debt Obligations (“CDOs”) include Collateralised Bond Obligations, Collateralised Loan Obligations and other similarly structured securities. The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which the Master Fund and its Subsidiaries invest. CDOs carry additional risks including, but not limited to, (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments, (ii) the quality of the collateral may decline in value or default, (iii) the Master Fund and its Subsidiaries may invest in CDOs that are subordinate to other classes, and (iv) the complex structure of the security may produce disputes with the issuer or unexpected investment results.

Derivative financial instruments The Master Fund and its Subsidiaries use derivative financial instruments such as forward exchange contracts, options, futures contracts, forward rate agreements and swaps, which are recorded at fair value at the reporting date. Realised and unrealised changes in fair values are included in realised and unrealised gains and losses on investments in the Consolidated Statement of Operations in the period in which the changes occur. The fair value of derivative financial instruments at the reporting date generally reflects the amount that the Master Fund and its Subsidiaries would receive or pay to terminate the contract at the reporting date. Many derivative financial instruments are exchange traded or are traded in the over-the-counter market where market values are normally readily obtainable. Where such market prices are not readily available, fair values will be determined using commercial products which utilise valuation models that are consistent with market pricing methods. When the Master Fund and its Subsidiaries purchase a put or call option, an amount, equal to the premium paid by the Master Fund and its Subsidiaries, is recorded as an investment and is subsequently adjusted to the current fair value of the option purchased on the reporting date. Premiums paid for purchasing options that expire unexercised are treated by the Master Fund and its Subsidiaries on the expiration date as realised losses from investments. The difference between the premium and the amount received on writing an option to effect a closing transaction, including brokerage commissions, is also treated as a realised loss, or, if the premium is less than the amount received from the closing transaction, as a realised gain. If a call option is exercised, the premium is added to the cost of purchase of the underlying security or currency in determining whether the Master Fund and its Subsidiaries has realised a gain or loss. If a put option is exercised, the premium reduces the proceeds of the securities sold by the Master Fund and its Subsidiaries. Unrealised gains or losses on open forward foreign exchange contracts and forward rate agreements represent the Master Fund and its Subsidiaries’ net equity therein and is calculated as the present value of the difference between the contract date rate and the applicable forward rate at the reporting date, applied to the face amount of the forward contract. The unrealised gain or loss at the reporting date is included in the Consolidated Statement of Assets and Liabilities. Unrealised gains or losses on open futures contracts are calculated as the difference between the contract price at trade date and the contract’s revaluation price. Any payments made to satisfy initial and variation margin are reflected as due to and due from broker balances on the Consolidated Statement of Assets and Liabilities. Unrealised gains or losses on swap agreements represent the cumulative fair value change since the last reporting date and are calculated as the present value of the future net cash flows to be received and paid under the agreement.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

23

2. Significant accounting policies (continued) Derivative financial instruments (continued) The following table sets forth the fair value of the Master Fund and its Subsidiaries’ derivative contracts by certain risk types as of 31 December 2011 in accordance with ASC 815. The values in the table below exclude the effects of cash received or posted pursuant to derivative contracts, and therefore are not representative of the Master Fund and its Subsidiaries’ net exposure. The derivative assets and derivative liabilities are included in “Investments at market value” and “Investments sold short at market value”, respectively, in the Consolidated Statement of Assets and Liabilities. Derivative Derivative Assets Liabilities Derivative contracts for trading activities US$ ’000 US$ ’000

Commodity Contracts (1,056 open positions) Credit Contracts (842 open positions) Equity Contracts (299 open positions) Foreign Exchange Contracts (5,415 open positions) Interest Rate Contracts (4,161 open positions) Gross Fair Value of Derivative Contracts

861,396 1,096,362 195,620 2,543,564 13,452,552 18,149,494

650,248 1,351,977 169,904 2,534,061 10,831,433 15,537,623

The following table sets forth by certain risk types the Master Fund and its Subsidiaries’ gains/(losses) related to derivative activities for the year ended 31 December 2011 in accordance with ASC 815. These gains/(losses) should be considered in the context that derivative contracts may have been executed to economically hedge certain securities and accordingly, certain gains or losses on derivative contracts may offset certain gains or losses attributable to securities. These gains/(losses) are included in “Net realised and unrealised gain/(loss) on investments” in the Consolidated Statement of Operations. Change in Realised Unrealised Gains/(Losses) Gains/(Losses) Year Ended Year Ended 31 December 2011 31 December 2011 Derivative contracts for trading activities US$ ’000 US$ ’000 Commodity Contracts 416,202 (240,451) Credit Contracts (34,026) (64,184) Equity Contracts (30,965) (15,122) Foreign Exchange Contracts (770,220) (179,043) Interest Rate Contracts 4,008,443 (639,462) Total 3,589,434 (1,138,262) The Master Fund and its Subsidiaries enter into derivative contracts that meet the definition of a credit derivative as defined by ASC 815. These contracts are primarily written and purchased credit default swaps on single issuers, asset-backed securities, credit indices and index or CDO tranches. The following table relates to the Master Fund and its Subsidiaries’ written credit derivatives as at 31 December 2011: Maximum Payout/Notional Amount by Period of Expiration Contract Type

Bespoke CDO tranches Corporates Credit index – corporate Credit index – mortgage backed Credit index tranche – corporate Mortgage backed Recovery Swap Sovereign Total

0-2 2-5 5 Years Years Years or Greater Total ‘000 ‘000 ‘000 ‘000

69,047 211,125 (194) 125,394 – 516,600 – – 332,561 103,966 – – – 5,000 (2,500) 1,227,385 398,914 2,189,470

– 280,172 40,037 165,237 – 516,600 580,545 580,545 (34,871) 401,656 5,604 5,604 – 5,000 1,052 1,225,937 592,367 3,180,751

24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Notes to the Consolidated Financial Statements continued 31 December 2011

2. Significant accounting policies (continued) Derivative financial instruments (continued) Maximum Payout/Notional Amount Offsetting Net of Offsetting Purchased Purchased Written Credit Written Credit Credit Credit Derivative at Derivative Derivative Derivative Fair Value Contract Type ‘000 ‘000 ‘000 US$ ’000

Bespoke CDO tranches Corporates Credit index – corporate Credit index – mortgage backed Credit index tranche – corporate Mortgage backed Recovery Swap Sovereign Total

280,172 286,364 552,973 744,045 484,958 5,604 5,000 1,636,150 3,995,266

– 280,172 (121,127) 165,237 (36,373) 516,600 (163,500) 580,545 (83,302) 401,656 – 5,604 – 5,000 (410,213) 1,225,937 (814,515) 3,180,751

(121,375) (15,487) (36,896) (375,977) (202,190) (5,462) (45) (34,757) (792,189)

The Master Fund and its Subsidiaries may execute these types of credit derivatives as it seeks to increase its total return or as a means of hedging credit exposure. Period of expiration, contract type, maximum payout and fair value are indicators of payment / performance risk. As a provider of credit protection, the Master Fund and its Subsidiaries receive a stream of payments from the counterparty representing the premium on the contract in exchange for guaranteeing the principal payment on a reference security or obligation upon the issuer’s default. Upon the occurrence of a specified credit event, as a seller of credit protection, the Master Fund and its Subsidiaries are entitled to take possession of the defaulted underlying security and pay the buyer an amount equal to the notional amount of the swap. It may alternatively pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap reduced by the recovery value of the reference obligation. Investments sold short The Master Fund and its Subsidiaries may sell a security it does not own in anticipation of a decline in the market value of that security. When the Master Fund and its Subsidiaries sell a security short, it must borrow the security and deliver it to the broker-dealer through which it made the short sale. The Master Fund and its Subsidiaries are required to maintain collateral with the broker-dealer from which the security was borrowed. A gain, limited to the value at which the Master Fund and its Subsidiaries sold the security short, or a loss, unlimited in size, will be recognised upon the termination of a short sale and recorded as a net realised gain or loss on investments in the Consolidated Statement of Operations. Investments sold short are recorded as liabilities on the Consolidated Statement of Assets and Liabilities. Foreign currency translation Investment securities and other assets and liabilities denominated in foreign currencies are translated into US Dollar amounts at prevailing exchange rates at the reporting date. Purchases and sales of investment securities in foreign currencies and income and expense items denominated in foreign currencies are translated into US Dollar amounts at the exchange rate on the respective dates of such transactions. The Master Fund and its Subsidiaries do not isolate that portion of the results of operations resulting from changes in currency exchange rates on investments from the fluctuations arising from changes in market prices of securities held. All currency gains and losses are included in net realised and unrealised gain or loss from investments in the Consolidated Statement of Operations.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. Significant accounting policies (continued) Use of estimates The preparation of Consolidated Financial Statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates. In particular, valuation models used to determine the fair value of unlisted derivative instruments require the use of a number of assumptions. Netting Financial assets and liabilities are offset and the net amount presented in the Statement of Assets and Liabilities when, and only when, the Master Fund has a legal right to offset the amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under U.S. GAAP. Basis of consolidation The Master Fund has consolidated the following entities (together the “Subsidiaries”) as at 31 December 2011: • BHMF Investments II Limited, a company incorporated with limited liability on 7 May 2010 under the laws of the Cayman Islands; • BHMF Investments III Limited, a company incorporated with limited liability on 23 May 2011 under the laws of the Cayman Islands; • WCG Strategies Fund Limited, a company incorporated with limited liability on 27 October 2008 under the laws of the Cayman Islands; The Master Fund owns 100% of BHMF Investments II Limited, 100% of BHMF Investments III Limited and 100% of WCG Strategies Fund Limited as at 31 December 2011. The Consolidated Financial Statements include full consolidation of wholly owned subsidiaries and of majority owned subsidiaries, except where the effect on the Master Fund’s financial position and results of operations are immaterial. Transactions between the Master Fund and the Subsidiaries have been eliminated on consolidation. Cash Cash consists of cash on hand and bank balances. Due from and to brokers Amounts receivable from and payable to brokers includes settlement of trades along with deposits held as collateral. As at 31 December 2011, deposits held as collateral amounted to US$720,341,594 and amounts pledged as collateral amounted to US$2,663,084,661.

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

25

Allocation of income and expenses between share classes Income and expenses that are identifiable with a particular class are allocated to that class in computing its Net Asset Value (NAV). Income and expenses that are common to all classes are allocated between classes based on their monthly NAVs. 3. Fair value measurements The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). The fair value hierarchy under ASC 820 prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 – Quoted prices for instruments that are identical or similar in markets that are not active and model derived valuations for which all significant inputs are observable, either directly or indirectly in active markets; Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and are unobservable.

26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Notes to the Consolidated Financial Statements continued 31 December 2011

3. Fair value measurements (continued) The hierarchy requires the use of observable market data when available. As required by ASC 820, investments are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following is a summary of the levels within the fair value hierarchy for the Master Fund and its Subsidiaries’ investments as at 31 December 2011: Assets Fair value measurement at reporting date:

Level 1: US$ ’000

Equity Securities

358,859

Private Placements

–

Funds

–

Level 2: US$ ’000

7,654

Level 3: US$ ’000

Total US$ ’000

–

366,513

– 54,695

54,695

1,224,732

– 1,224,732

Fixed Income Securities Asset Backed Securities – 371,459 31,863 403,322 Corporate Debt Securities 453,337 2,769 537 456,643 Mortgage Backed Securities – 1,630,839 48,249 1,679,088 Non US Government Debt 8,506,456 – – 8,506,456 Other Debt Obligations – 19,730 – 19,730 US Government Debt 25,441,041 – – 25,441,041 Derivatives Commodity Contracts 861,396 – – Credit Contracts – 1,096,362 – Equity Contracts 171,468 24,152 – Foreign Exchange Contracts 255 2,543,309 – Interest Rate Contracts 823,254 12,629,298 – Total assets 36,616,066 19,550,304 135,344

861,396 1,096,362 195,620 2,543,564 13,452,552 56,301,714

Liabilities Fair value measurement at reporting date:

Equity Securities

Level 1: US$ ’000

421,273

Level 2: US$ ’000

–

Level 3: US$ ’000

–

Total US$ ’000

421,273

Fixed Income Securities Corporate Debt Securities 9,808 – – 9,808 Mortgage Backed Securities – 7,581 – 7,581 Non US Government Debt 499,958 – – 499,958 US Government Debt 1,165,522 – – 1,165,522 Derivatives Commodity Contracts 649,992 256 – Credit Contracts – 1,351,977 – Equity Contracts 145,892 24,012 – Foreign Exchange Contracts 19 2,534,042 – Interest Rate Contracts 692,194 10,139,239 – Total liabilities 3,584,658 14,057,107 –

650,248 1,351,977 169,904 2,534,061 10,831,433 17,641,765

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

27

3. Fair value measurements (continued) The fair value of Equity Securities by industry type is presented in the Consolidated Condensed Schedule of Investments. Foreign exchange contracts include foreign exchange futures, forwards, swaps, options and any other derivative contract in which the reference asset is a foreign exchange rate. Commodity contracts include commodity futures and options and any other derivative contract in which the reference asset is a commodity price or index. Credit contracts include credit default swaps, credit index options and any other derivative contract in which the reference asset is a credit event or other credit risk on an underlying entity, financial asset or a credit index. Equity contracts include equity futures, forwards, options, swaps, contracts for difference and any other derivative contract in which the reference asset is an equity price or index. Interest rate contracts include interest rate futures, forwards, swaps, options, caps and floors, swaptions, forward rate agreements and any other derivative contract in which the reference asset is an interest rate or debt security. The Master Fund and its Subsidiaries policy is to recognise transfers in and transfers out of each level as at the end of each month. Transfers in and transfers out of Level 3 have occurred due to the change in availability of observable market data. There were no significant transfers between Level 1 and Level 2 during the year ended 31 December 2011. The Master Fund had no investments measured at fair value on a non-recurring basis during the year ended 31 December 2011. The following table presents additional information about Level 3 assets measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Master Fund and its Subsidiaries have classified within the Level 3 category. As a result, the unrealised gains and losses for assets within the Level 3 category in the table below may include changes in fair value that were attributable to both observable (e.g. changes in market interest rates) and unobservable (e.g. changes in unobservable long-dated volatilities) inputs. Level 3 Assets Investments

Beginning balance as of 1 January 2011 Purchases Sales Transfers in to Level 3 Transfers out of Level 3 Realised gain/(loss) Change in unrealised gain/(loss) Ending balance as of 31 December 2011

Asset Backed Corporate Mortgage Backed Other Debt Private Securities Debt Securities Obligations Placement US$ ’000 US$ ’000 US$ ’000 US$ ’000 US$ ’000

5,893 54,956 (18,224) 24,164 (31,120) 1,545 (5,351) 31,863

– 7,987 (6,247) – – – (1,203) 537

795 66,346 (28,924) 42,318 (26,486) 2,211 (8,011) 48,249

2,221 – (311) – (1,942) (3) 35 –

70,491 6,588 (23,280) – – 1,739 (843) 54,695

Total US$ ’000

79,400 135,877 (76,986) 66,482 (59,548) 5,492 (15,373) 135,344

Liabilities At 31 December 2011, there were no Level 3 investments held short. The change in unrealised movement for the year ended 31 December 2011 for Level 3 investments still held at 31 December 2011 amounted to an unrealised loss of US$15,372,768 and is included in net change in unrealised depreciation on investments, investments purchased under agreements to resell and investments sold under agreements to repurchase on the Consolidated Statement of Operations.

28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Notes to the Consolidated Financial Statements continued 31 December 2011

4. Operational services fee The Manager has received from the Master Fund a fee of 1/12 of 0.50% per month of the NAV, prior to the deduction of management and performance fees, of the Master Fund for the year to 31 December 2011 (the “operational services fee”) as at the last valuation day in each month (excluding for these purposes such part of the NAV of the Master Fund which is attributable to (i) any investments made in other investment funds managed by the Manager which also charge an operational services fee, or (ii) the Class Z ordinary shares in the Master Fund). The Manager has appointed BHAM to provide certain services in respect of the Master Fund (including middle-office and back-office services and information technology services), for which the Manager pays BHAM a fee equal to the operational services fee the Manager receives from the Master Fund. The operational services fee for the year ended 31 December 2011 amounted to US$124,266,796. The operational services fee receivable at 31 December 2011 is US$46,430. 5. Management and performance fees The Manager receives a management fee of 1/12 of 2% (or a pro rata proportion thereof) per month of the NAV (before deduction of that month’s management fee and before making any deduction for any accrued performance fee) as at the last valuation day in each month, payable monthly in arrears on Class X shares and Class Y shares. No management fees are payable in respect of Class A shares, Class B shares and Class Z shares. The management fee payable at 31 December 2011 is US$2,808. The Manager also receives a performance fee. The performance fee is equal to the relevant percentage of the appreciation in the NAV per share of that class during that calculation period which is above the base NAV of that class. The base NAV per share is the greater of the NAV per share of the relevant class at the time of issue of such share and the highest NAV per share achieved as at the end of any previous calculation period. For the Master Fund, the applicable performance fees are 20% for Class X and 25% for Class Y. No performance fees are payable in respect of Class A shares, Class B shares and Class Z shares. Performance fees may be settled in cash or in the cash equivalent of US Treasury Bills at fair value on the date of transfer. In respect of the Subsidiaries, the applicable performance fees for 2011 are 20% for Class A of WCG Strategies Fund Limited. Performance fees for the period were US$17,220,012 and the performance fee payable at 31 December 2011 was US$14,625,046. At 31 December 2011 the Master Fund held investments in the following funds (each an “underlying fund investment”) managed by one or more of the Brevan Howard group of affiliated entities:

US$ BHMF Investments II Limited 15,880,327 BHMF Investments III Limited 15,000 Brevan Howard Commodities Strategies Fund L.P. 209,986,129 Brevan Howard Emerging Markets Strategies Fund L.P. 473,660,550 Brevan Howard Equity Strategies Master Fund Limited 1,742,903 Brevan Howard Investment Fund – Absolute Return Bond Plus Fund 101,145,425 Brevan Howard Investment Fund – Emerging Markets Local Fixed Income Fund 98,187,679 Brevan Howard Investment Fund – Emerging Markets Local Fixed Income Fund Limited 10,141,000 Brevan Howard Strategic Opportunities Fund Limited 4,790,180 Brevan Howard Systematic Trading Master Fund Limited 325,077,813 WCG Strategies Fund Limited 1,012,436,013 The return on the Master Fund’s investment in these funds is net of applicable performance and management fees. To ensure that the effective rate of management fees and/or performance fees that is ultimately borne by shareholders in the Master Fund or Feeder Funds (in relation to each underlying fund investment) is not greater than the rate of performance and/or management fees applicable to the class of share held by that investor, the Master Fund or Feeder Fund reduces management and performance fees charged in relation to these investment holdings accordingly. 6. Administration fee Under the terms of the Administrative Services Agreement, as amended, dated 18 February 2011 between International Fund Services (Ireland) Limited (“IFS”) and the Master Fund, the Administrator receives a fee based on the month-end NAV of the Master Fund and its Subsidiaries calculated and payable monthly in arrears. The administration fee on a monthly basis is 1/12 of 14 basis points (on the first $15 billion month end NAV), 1/12 of 11 basis points (on the next $15 billion month end NAV) and 1/12 of 9 basis points (on net assets over $30 billion month end NAV), of the excess of the Master Fund’s month end NAV over the sum of NAV that represents the amount of investment made by the Master Fund in other Brevan Howard managed funds administrated by IFS held in the same month. The administration fee payable at 31 December 2011 is US$2,541,420. Administration fees are also incurred on investments made in affiliated and non-affiliated funds by the Master Fund that are not administered by IFS.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7. Investments purchased under agreements to resell and investments sold under agreements to repurchase At 31 December 2011, investments with a market value of US$3,143,130,300 were pledged to the Master Fund and its Subsidiaries as collateral (investments purchased under agreements to resell) and investments with a value of US$13,766,398,427 were pledged by the Master Fund and its Subsidiaries as collateral (investments sold under agreements to repurchase). All agreements to repurchase mature by 3 June 2012 and all agreements to resell mature by 3 June 2012. 8. Share capital The Master Fund has an authorised share capital of: • €100,000 divided into 10,000,000 ordinary shares of €0.01 par value; • US$400,000 divided into 40,000,000 ordinary shares of US$0.01 par value; • £100,000 divided into 10,000,000 ordinary shares of £0.01 par value; • ¥10,000,000 divided into 10,000,000 ordinary shares of ¥1.00 par value; • AUD400,000 divided into 40,000,000 ordinary shares of AUD0.01 par value; • BRL400,000 divided into 40,000,000 ordinary shares of BRL0.01 par value; • CAD400,000 divided into 40,000,000 ordinary shares of CAD0.01 par value; • CHF400,000 divided into 40,000,000 ordinary shares of CHF0.01 par value; • NOK400,000 divided into 40,000,000 ordinary shares of NOK0.01 par value; • SGD400,000 divided into 40,000,000 ordinary shares of SGD0.01 par value. All of which may be issued as Class A, Class B, Class X, Class Y and Class Z shares in any number of series. The Class A US Dollar share class is divided into two series of shares, relating to Brevan Howard Fund Limited and Brevan Howard L.P. and may be issued as US$ shares or Gold shares. These series commenced on 1 April 2003 and 1 February 2004 respectively. All Class A US Dollar, Euro, Sterling, Australian Dollar, Canadian Dollar, Brazilian Real, Norwegian Krone, Singapore Dollar, Gold and Yen shares are held by

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

29

Brevan Howard Fund Limited, whilst all Class A US Dollar L.P. shares are held by Brevan Howard L.P. All Class B US Dollar, Euro and Sterling shares are held by BH Macro Limited. Class Y US Dollar, Euro and Sterling shares are held by Brevan Howard Global Opportunities Master Fund Limited. Class Z US Dollar, Euro, Sterling and Yen shares are held by Brevan Howard Multi‑Strategy Master Fund Limited. The rights of the Class X US Dollar, Euro and Sterling Shares are substantially the same as those set out in respect of Class A US Dollar, Euro and Sterling Shares respectively in the Feeder Fund Prospectus save that no redemption fees are payable in respect of such shares. The rights of the Class Y US Dollar, Euro and Sterling Shares are substantially the same as those set out in respect of Class B US Dollar, Euro and Sterling Shares respectively in the Feeder Fund Prospectus. The rights of the Class Z US Dollar, Euro, Sterling and Yen Shares are substantially the same as those set out in respect of Class A US Dollar, Euro and Sterling Shares respectively in the Feeder Fund Prospectus. During the year 495,128 shares were redeemed by the Master Fund following a decision by the fund’s board of directors, with the proceeds paid by way of cash amounting to $1,209,386,609. The value redeemed reflected the attributable net asset value of the shares at that date. This redemption was in line with the terms and conditions set out in the Master Fund’s prospectus.

30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Notes to the Consolidated Financial Statements continued 31 December 2011

8. Share capital (continued) 2011 Shares

Shares in issue at start of year US Dollar Class A US Dollar L.P. Class A Euro Class A Sterling Class A Yen Class A Australian Dollar Class A Brazilian Real Class A Canadian Dollar Class A Norwegian Krone Class A Singapore Dollar Class A Swiss Franc Class A

3,699,216 829,180 387,470 257,679 4,305,902 759,348 86,533 67,220 285,802 200,631 120,493

US Dollar Class B Euro Class B Sterling Class B

265,152 122,777 282,768

US Dollar Class Y Euro Class Y Sterling Class Y

838,792 135,797 1,498,660

US Dollar Class Z Euro Class Z Sterling Class Z Yen Class Z

1,895,050 305,935 105,626 137,730

Shares issued during the year US Dollar Class A US Dollar L.P. Class A Euro Class A Sterling Class A Yen Class A Australian Dollar Class A Brazilian Real Class A Canadian Dollar Class A Norwegian Krone Class A Singapore Dollar Class A Gold Class A

574,686 125,527 22,285 74,187 1,163,124 14,764 2,650 109,058 193,910 206,374 37

US Dollar Class B Sterling Class B US Dollar Class Y Euro Class Y Sterling Class Y

1,594 43,033 130,600 23,936 412,092

US Dollar Class Z Euro Class Z Sterling Class Z Yen Class Z

2,791,037 99,246 1,679,466 93,893

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

31

8. Share capital (continued) 2011 Shares

Shares redeemed during the year US Dollar Class A US Dollar L.P. Class A Euro Class A Sterling Class A Yen Class A Australian Dollar Class A Canadian Dollar Class A Singapore Dollar Class A Swiss Franc Class A

(1,125,803) (245,665) (115,351) (68,302) (902,346) (155,930) (70,863) (3,443) (120,493)

US Dollar Class B Euro Class B Sterling Class B

(24,287) (46,356) (15,214)

US Dollar Class Y Euro Class Y Sterling Class Y

(303,249) (27,443) (56,212)

US Dollar Class Z Euro Class Z Sterling Class Z

(1,929,665) (64,762) (93,896)

Shares in issue at end of year US Dollar Class A US Dollar L.P. Class A Euro Class A Sterling Class A Yen Class A Australian Dollar Class A Brazilian Real Class A Canadian Dollar Class A Norwegian Krone Class A Singapore Dollar Class A Gold Class A

3,148,099 709,042 294,404 263,564 4,566,680 618,182 89,183 105,415 479,712 403,562 37

US Dollar Class B Euro Class B Sterling Class B

242,459 76,421 310,587

US Dollar Class Y Euro Class Y Sterling Class Y

666,143 132,290 1,854,540

US Dollar Class Z Euro Class Z Sterling Class Z Yen Class Z

2,756,422 340,419 1,691,196 231,623

It is envisaged that no income or gains are to be distributed by way of dividend.

32

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Notes to the Consolidated Financial Statements continued 31 December 2011

9. Taxes Under current Cayman Islands laws, the Master Fund is not required to pay any taxes in the Cayman Islands on either income or capital gains. The Master Fund has received an undertaking from the Governor in Cabinet in the Cayman Islands exempting it from any such taxes for a period of 20 years until 11 February 2023. The only taxes payable by the Master Fund on its income are withholding taxes applicable to certain income. Accordingly, no provision for taxes is recorded in these Consolidated Financial Statements. ASC 740, Income Taxes, established financial accounting and disclosure requirements for recognition and measurement of tax positions taken or expected to be taken on a tax return. The Manager has reviewed the Master Fund’s tax positions for all open tax years and has concluded that no provision for income tax is required in the Master Fund’s Consolidated Financial Statements. The Master Fund is subject to potential examination by certain taxing authorities in various jurisdictions. The tax liability is also subject to ongoing interpretation of laws by taxing authorities. The tax years under potential examination vary by jurisdiction. 10. Financial instruments with off-balance sheet risk or concentration of credit risk Derivative financial instruments may result in off-balance sheet market and credit risk. Market risk is the possibility that future changes in market price may make a financial instrument less valuable or more onerous. If the markets should move against one or more positions that the Master Fund and its Subsidiaries holds, the Master Fund and its Subsidiaries could incur losses greater than the unrealised amounts recorded in the Consolidated Statement of Assets and Liabilities. The principal credit risk is that the counterparty to the Master Fund and its Subsidiaries will default and fail to fulfill the terms of the agreement. Investments sold short have market risk to the extent that the Master Fund and its Subsidiaries, in satisfying its obligation, may have to purchase securities to cover a short position at a higher value than that recorded on the Consolidated Statement of Assets and Liabilities. Futures contracts expose the Master Fund and its Subsidiaries to credit, market and liquidity risks. The Master Fund and its Subsidiaries are exposed to market risk such that changes in the market values of the securities or indices underlying a contract may exceed the amount recognised in the Consolidated Statement of Assets and Liabilities. Liquidity risk represents the possibility that the Master Fund and its Subsidiaries may not be able to rapidly adjust the size of its futures position in times of high volatility and financial stress at a reasonable price. Forward contracts expose the Master Fund and its Subsidiaries to market and liquidity risks. The Master Fund and its Subsidiaries are exposed to market risk to the extent that adverse changes occur in the value of the underlying asset. Liquidity risk represents the

possibility that the Master Fund and its Subsidiaries may not be able to rapidly adjust the size of its forwards positions in times of high volatility and financial stress at a reasonable price. As a purchaser of an option contract, the Master Fund and its Subsidiaries are subject to credit risk since the counterparty is obligated to make payments under the terms of the option contract if the Master Fund and its Subsidiaries exercise the option. As a purchaser of an option contract, the Master Fund and its Subsidiaries are only subject to market risk to the extent of the premium paid. The Master Fund and its Subsidiaries purchase both exchangetraded and over-the-counter options. For exchange-traded option contracts, the stock exchange acts as the counterparty to specific transactions and therefore bears the risk of delivery to and from counterparties of specific positions. Over-the-counter option contracts are not guaranteed by any regulated stock exchange. The Master Fund and its Subsidiaries invest in fixed income securities and bank loans. Until such investments are sold or mature, the Master Fund and its Subsidiaries are exposed to credit risk relating to whether the issuer will meet its obligation as it comes due. Entering into credit default swap agreements and contracts for difference exposes the Master Fund and its Subsidiaries to market risks equivalent to actually holding securities of the notional value but typically involve little capital commitment relative to the exposure achieved. The gains or losses of the Master Fund and its Subsidiaries may therefore be significantly greater than this initial commitment. In connection with investments sold under agreements to repurchase, it is the Master Fund and its Subsidiaries’ policy that their prime brokers take possession of the underlying collateral securities. If the seller defaults and the fair value of the collateral declines, realisation of the collateral by the Master Fund and its Subsidiaries may be delayed or insufficient. In accordance with ASC 815 the Master Fund records its trading‑related derivative activities on a fair value basis (as described in Note 2). Assets and liabilities represent the fair value of the Master Fund’s and its Subsidiaries’ holdings at the year end. These assets and liabilities are not representative of the outstanding credit risk to the Master Fund and its Subsidiaries due to the existence of master netting agreements. The table reflects the gross fair value of the Master Fund’s and its Subsidiaries’ derivative instruments.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

33

10. Financial instruments with off-balance sheet risk or concentration of credit risk (continued) Fair value at 31 December 2011 Assets Liabilities US$ ’000 US$ ’000

Commodity options Credit default swaps Cross currency swaps Equity options Equity swaps Exchange traded futures Exchange traded options Forward rate agreements FX contracts FX options Interest rate guarantee options Interest rate swaps Swaptions

824,379 1,096,362 300,399 174,922 17,580 417,215 456,522 43,759 1,104,776 1,138,135 1,347,208 4,094,326 7,133,911 18,149,494

609,949 1,351,977 302,975 151,170 14,392 383,978 357,089 115,097 1,221,991 1,009,076 595,141 4,850,640 4,574,148 15,537,623

Fair values represent the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Master Fund and its Subsidiaries maintain trading relationships with counterparties that include domestic and foreign brokers, dealers and financial institutions; these relationships could result in the concentration of the credit risk if counterparties fail to fulfill their obligations or the value of any collateral becomes inadequate. BHIPL has formulated credit review policies that attempt to control credit risk by following an established credit approval process, daily monitoring of net exposure to individual counterparties, requiring the segregation of collateral where possible, and using master netting agreements whenever possible. Liquidity risk The Master Fund’s and its Subsidiaries investment portfolios are leveraged and are actively managed to ensure there is sufficient liquidity to meet collateral calls, shareholder redemption requests and trading and other liabilities as they become due. The Master Fund and its Subsidiaries seek to trade mainly in investments that are sufficiently liquid and readily realisable at close to fair value in order to meet any potential liquidity requirement. To this end, the Master Fund and its Subsidiaries monitor the speed at which the portfolio can be liquidated under ordinary market conditions and further monitors liquidity by a number of additional measures. Deteriorating market conditions, however, may hamper the ability of the fund to liquidate its investments in an orderly manner. From time to time, market participants with which the Master Fund and its Subsidiaries effect transactions might cease making markets or quoting prices in certain instruments, may only continue to do so in limited size, or may widen the spreads at which they are prepared to transact. In such instances, the Master Fund and its Subsidiaries might be unable to enter into desired transactions, or close out existing transactions, at normal market levels, which might adversely affect its performance. The Master Fund’s and its Subsidiaries liquidity risk is monitored on a daily basis by staff of the Investment Managers, independent of the portfolio management team, using measures of risk and unencumbered cash and cash equivalents, and includes an escalation process in circumstances where liquidity approaches tolerance levels. The Master Fund and its Subsidiaries may restrict redemptions in accordance with their Articles of Association if they receive requests for the redemption of Shares on any Redemption Day representing in aggregate more than ten per cent of the total number of Ordinary Shares then in issue on a class by class basis.

34

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued 31 December 2011

11. Financial Highlights The following tables include selected data for share classes outstanding throughout the year and other performance information derived from the Consolidated Financial Statements. The per share amounts and ratios which are shown reflect the consolidated income and expenses of the Master Fund. Australian Brazilian Canadian Norwegian Singapore Swiss Per Share Operating US Dollar Euro Sterling Yen Dollar Real Dollar Krone Dollar Franc Gold Performance Class A Class A Class A Class A Class A Class A Class A Class A Class A Class A Class A US$ € £ ¥ AUD BRL CAD NOK SGD CHF XAU

Net asset value, beginning of year Shares issued during year Income from investment operations Net investment income Equalisation Net realised and unrealised gain on investments Total from investment operations Net asset value redeemed during year Net asset value, end of year Total return before performance fee Performance fee Total return after performance fee

Supplemental Data Net assets 31 December 2011 Average net assets for 2011 Ratio to average net assets Operating expenses Interest and dividend expenses Performance fee Net investment income

3,672.46 3,596.26 3,997.32 11,913.45 1,088.17 1,126.48 1,042.33 1,060.51 1,009.18 986.67

–

–

–

–

–

–

–

–

–

–

– 100.00

8.86 –

8.94 –

9.61 –

28.43 –

2.68 –

2.95 –

2.53 –

2.58 –

2.46 –

0.28 –

0.26 –

623.17

640.57

695.24 1,974.06

249.10

299.71

188.55

206.31

170.02

9.58

11.34

632.03 649.51 704.85 2,002.49 251.78 302.66 191.08 208.89 172.48 9.86 11.60 –

–

–

–

–

–

–

–

– (996.53)

4,304.49 4,245.77 4,702.17 13,915.94 1,339.95 1,429.14 1,233.41 1,269.40 1,181.66

–

– 111.60

17.21% –

18.06% –

17.63% –

16.81% –

23.14% –

26.87% –

18.33% –

19.70% –

17.09% –

1.00% 11.60% – –

17.21%

18.06%

17.63%

16.81%

23.14%

26.87%

18.33%

19.70%

17.09%

1.00% 11.60%

US$ ’000

€ ’000

£ ’000

¥ ’000

AUD ’000

BRL ’000

CAD ’000

NOK ’000

SGD ’000 CHF ’000 XAU ‘000

13,550,952 1,249,972 1,239,322 63,549,644

828,331

127,454

130,020

608,949

476,875

–

4

13,930,353 1,355,412 1,185,128 58,447,349

805,581

112,196

121,735

432,619

336,490 120,075

2

1.15%

1.16%

1.17%

1.14%

1.15%

1.16%

1.15%

1.15%

1.15%

0.84% 1.06%

1.61% 1.62% 1.58% 1.56% 1.60% 1.57% 1.63% 1.46% 1.43% 2.37% 0.99% – – – – – – – – – – – 2.76% 2.78% 2.73% 2.71% 2.75% 2.73% 2.80% 2.60% 2.58% 3.21% 2.05% 0.22%

0.22%

0.22%

0.23%

0.22%

0.23%

0.20%

0.27%

0.26%

0.33% 0.53%

Operating expenses are total expenses from the Consolidated Statement of Operations, less interest and dividend expenses and performance fee. Operating expenses, interest and dividend expenses and net investment income/(loss) ratios are annualised. Total returns and ratios on performance fee are not annualised.

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

35

11. Financial Highlights (continued) Per Share Operating Performance

Net asset value, beginning of year Shares issued during year Income from investment operations Net investment income/(loss) Equalisation Net realised and unrealised gain on investments Total from investment operations Net asset value redeemed during year Net asset value, end of year Total return before performance fee Performance fee Total return after performance fee

Supplemental Data Net assets 31 December 2011 Average net assets for 2011 Ratio to average net assets Operating expenses Interest and dividend expenses Performance fee Net investment income/(loss)

US Dollar L.P. US Dollar Euro Sterling US Dollar Euro Sterling US Dollar Euro Sterling Yen Class A Class B Class B Class B Class Y Class Y Class Y Class Z Class Z Class Z Class Z US$ US$ € £ US$ € £ US$ € £ ¥

3,299.84 2,069.75 2,080.67 2,150.51 125.38 120.90 121.33 103.58 103.66 103.69 10,260.13 –

–

–

–

–

–

–

–

–

–

–

5.82 –

5.03 –

5.25 –

5.07 –

(6.57) –

(6.62) 0.04

(6.52) 0.01

1.02 –

1.01 –

1.00 –

98.95 –

562.12

351.22

370.58

374.17

21.02

21.25

20.83

17.62

18.53

18.10

1,705.68

567.94 356.25 375.83 379.24 14.45 14.67 14.32 18.64 19.54 19.10 1,804.63 –

–

–

–

–

–

–

–

–

–

–

3,867.78 2,426.00 2,456.50 2,529.75 139.83 135.57 135.65 122.22 123.20 122.79 12,064.76 17.21% –

17.21% –

18.06% –

17.63% –

15.03% 15.88% 15.44% 18.00% (3.51%) (3.75%) (3.64%) –

18.85% –

18.42% –

17.59% –

17.21%

17.21%

18.06%

17.63%

11.52% 12.13%

US$ ’000

US$ ’000

€ ’000

£ ’000

US$ ’000

2,742,420

588,204 187,729

785,709

93,149

17,935 251,568 336,894

41,939 207,658 2,794,474

2,942,477

577,854 227,887

702,556

93,257

16,791 215,684 297,085

40,804

56,857 2,263,306

1.15%

3.01%

3.03%

0.49%

0.41%

1.15%

1.15%

1.17%

€ ’000

11.80%

18.00%

18.85%

18.42%

17.59%

£ ’000

US$ ’000

€ ’000

£ ’000

¥ ’000

3.02%

0.48%

0.48%

1.60% 1.61% 1.66% 1.57% 1.67% 1.61% 1.57% 1.50% 1.58% 0.99% 1.48% – – – – 3.25% 3.50% 3.47% – – – – 2.75% 2.76% 2.83% 2.72% 7.93% 8.14% 8.06% 1.98% 2.07% 1.40% 1.96% 0.22%

0.22%

0.21%

0.23%

(4.89%) (5.12%)

(5.08%)

0.92%

0.90%

1.02%

0.91%

Operating expenses are total expenses from the Consolidated Statement of Operations, less interest and dividend expenses and performance fee. Operating expenses, interest and dividend expenses and net investment income/(loss) ratios are annualised. Total returns and ratios on performance fee are not annualised.

36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Notes to the Consolidated Financial Statements continued 31 December 2011

12. Related party transactions Brevan Howard Capital Management L.P. acting through its sole general partner, Brevan Howard Capital Management Limited, is Manager of the Master Fund. The Manager has appointed each of: (i) BHAM; (ii) BHIPL; (iii) Brevan Howard (Hong Kong) Limited; (iv) Brevan Howard (Israel) Limited; (v) DW Investment Management, L.P and (vi) BH-DG Systematic Trading LLP as Investment Managers of the Master Fund’s assets. The transactions with the Investment Managers and fees payable at the year-end are disclosed in Note 5 to the Consolidated Financial Statements. Brevan Howard Multi-Strategy Master Fund Limited (“BHMS”) is a Cayman incorporated limited liability company that is permitted to invest its assets in any investment funds of which one or more of the Brevan Howard group of affiliated companies is the manager or investment manager. The Manager of the Master Fund is also the manager of BHMS. BHMS held 2.94% (US$746,578,242) of the net assets of the Master Fund through a holding of US Dollar, Euro, Sterling and Yen Class Z shares as at 31 December 2011. BH Global Limited (“BHG”) is a Guernsey incorporated closed-ended investment company listed on the London Stock Exchange that invests all of its assets in the Brevan Howard Global Opportunities Master Fund Limited (“BHGOMF”). The Manager of the Master Fund, is also the manager of BHG and BHGOMF. BHGOMF is permitted to invest in any investment funds of which one or more of the Brevan Howard group of affiliated entities is the manager or investment manager. At 31 December 2011 BHGOMF held 1.98% (US$503,449,395) of the net assets of the Master Fund. As at 31 December 2011 the Master Fund held investments in funds managed by one or more of the Brevan Howard group of affiliated entities as set out in Note 5. 13. Long-term interest-bearing subscriptions receivable The subscriptions receivable amount of US$ 141,900,116 is due from Brevan Howard Fund Limited and relates to Nil Paid US Dollar Class C and Nil Paid Sterling Class C shares issued by the Feeder Fund. Upon issuance of these Nil and Partly Paid shares by the Feeder Fund, additional shares were issued by the Master Fund (US Dollar Class A and Sterling Class A shares), resulting in the recognition of a corresponding receivable balance. The following table details the share transactions during the year:

Nil Paid US Dollar Class C Nil Paid Sterling Class C

In Issue At Start of Year

Issued during the Year

227,933 138,926

46,467 42,817

Redeemed during the Year

In Issue At End of Year

(191,527) (68,205)

82,873 113,538

The Nil Paid US Dollar Class C and Nil Paid Sterling Class C shares are issued to Brevan Howard Employee Benefit Trust Number 3, Brevan Howard Employee Benefit Trust Number 7, BH Partners L.P. and BH Partners 2009 LP. The Partly Paid Sterling Class D shares are issued to, or for the benefit of, Partners of BHAM. A guarantee to pay any unmet capital calls covering the issue of the Class C shares has been given to the Feeder Fund by the Manager.

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

37

13. Long-term interest-bearing subscriptions receivable (continued) Accrued interest receivable in the form of a funding fee has been recognised by the Feeder Fund as follows: Number of Funding Share Class Issue Date Redemption Date Issued Shares Fee Rate

Nil Paid US Dollar Class C Nil Paid US Dollar Class C Nil Paid US Dollar Class C Nil Paid Sterling Class C Nil Paid Sterling Class C Nil Paid Sterling Class C

Jan-2009 Jan-2010 Jan-2011 Jan-2009 Jan-2010 Jan-2011

Jan-2012 Jan-2013 Jan-2014 Jan-2012 Jan-2013 Jan-2014

– 36,406 46,467 – 70,721 42,817

1.03% 1.32% 1.50% 2.70% 1.85% 0.98%

This funding fee, together with the long-term interest-bearing subscriptions receivable, is withheld from the redemption proceeds at the end of the term by the Feeder Fund. The Directors of the Feeder Fund have resolved to call any Nil Paid Class C shares if the prevailing NAV of such share falls below 90% of the NAV at issuance. 14. Investment in affiliated funds The Master Fund has invested in a number of affiliated funds as set out in Note 5. 15. Equalisation Factor Where Shares are subscribed for at a time when the NAV per Share is greater than the Peak NAV per Share of the relevant Class, the investor will be required to pay an amount in excess of the then current NAV per Share of that Class equal to the Relevant Percentage of the difference between the then current NAV per Share of that Class (before accrual for the Performance Fee) and the Peak NAV per Share of that Class (an “Equalisation Credit”). At the date of subscription the Equalisation Credit will equal the Performance Fee per Share accrued with respect to the other Shares of the same Class in the Master Fund (the “Maximum Equalisation Credit”). The Equalisation Credit is payable to account for the fact that the NAV per Share of that Class has been reduced to reflect an accrued Performance Fee to be borne by existing Shareholders of the same Class and serves as a credit against Performance Fees that might otherwise be payable by the Master Fund but that should not, in equity, be charged against the Shareholder making the subscription because, as to such Shares, no favourable performance has yet occurred. The Equalisation Credit ensures that all holders of Shares of the same Class have the same amount of capital at risk per Share. The additional amount invested as the Equalisation Credit will be at risk in the Master Fund and will therefore appreciate or depreciate based on the performance of the relevant Class subsequent to the issue of the relevant Shares but will never exceed the Maximum Equalisation Credit. In the event of a decline as at any Valuation Day in the NAV per Share of those Shares, the Equalisation Credit will also be reduced by an amount equal to the Relevant Percentage of the difference between the NAV per Share (before accrual for the Performance Fee) at the date of issue and as at that Valuation Day. Any subsequent appreciation in the NAV per Share of the relevant Class will result in the recapture of any reduction in the Equalisation Credit but only to the extent of the previously reduced Equalisation Credit up to the Maximum Equalisation Credit. At the year end the equalisation factor accrued but not crystallised was US$970,173 while the portion that crystallised during the year represented a write-back of US$72,651. 16. Subsequent Events For the year ended 31 December 2011, the Master Fund and its Subsidiaries evaluated subsequent events through 14 March 2012. No material events which would require to be disclosed in the Consolidated Financial Statements occurred during this period.

38

Notes

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Notes

39

40

Notes

BREVAN HOWARD MASTER FUND LIMITED ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS 2011

Management and Administration Directors Karla Bodden Dennis Hunter Nagi Kawkabani Philippe Lespinard Bruce Levitt Jonas Rinné Phil Schmitt James Vernon Registered Office 113 South Church Street PO Box 309 George Town Grand Cayman KY1-1104 Cayman Islands Manager Brevan Howard Capital Management L.P. 4th Floor One Esplanade St Helier Jersey JE2 3QA Channel Islands Investment Managers Brevan Howard Asset Management LLP 55 Baker Street London W1U 8EW United Kingdom Brevan Howard (Hong Kong) Limited Suite 1201-02 ICBC Tower Citibank Plaza 3 Garden Road Hong Kong Brevan Howard Investment Products Limited 4th Floor One Esplanade St Helier Jersey JE2 3QA Channel Islands Brevan Howard (Israel) Limited 7th Floor 7 Menachem Begin Street Gibor Sport Building Ramat-Gan Israel 52521

Designed and produced by Fin International

DW Investment Management, L.P. 590 Madison Avenue, 9th Floor New York, NY 10022 USA BH-DG Systematic Trading LLP 4th Floor Reading Bridge House George Street Reading Berkshire RG1 8LS United Kingdom Auditors KPMG PO Box 493 Century Yard, Cricket Square Grand Cayman KY1-1106 Cayman Islands Legal Advisors (Cayman Law) Maples and Calder 113 South Church Street PO Box 309 George Town Grand Cayman KY1-1104 Cayman Islands Legal Advisors (English Law) Simmons & Simmons Citypoint One Ropemaker Street London EC2Y 9SS United Kingdom Administrator International Fund Services (Ireland) Limited 78 Sir John Rogerson’s Quay Dublin 2 Ireland